Q1 2025 Alcon Inc Earnings Call
Greetings and welcome to the Alcon first quarter 2025 earnings call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation.
Should anyone require operator assistance during the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded it is now my pleasure to introduce your host Dan Cravens VP of Investor Relations. Thank you you may begin.
Welcome to <unk> first quarter 2025 earnings conference call yesterday, we issued a press release interim financial report and presentation. You can find all these documents on our website at Investor Alcon Dot com.
Please note that starting this quarter in order to streamline our reporting the interim financial report and other filings will be limited to information required by regulations non <unk> results, including constant currency growth to core items will only be presented in the press release and presentation.
Speaker Change: Joining me on today's call are David Endicott, Our Chief Executive Officer, and Tim Stonesifer, Our Chief Financial Officer, Our press release presentation and discussion will include forward looking statements. We expressly disclaim any obligation to update forward looking statements as a result of new information or future developments, except as required.
By law.
Speaker Change: Our actual results may differ materially from those expressed or implied in our forward looking statements and as such you should not place undue reliance on any forward looking statements important factors that could cause our actual results to differ materially from those in our forward. Looking statements are included in our form 20-F earnings press release and interim.
Speaker Change: Financial report, which are on file with the Securities and Exchange Commission and available on their website at SEC Gov. Non <unk> financial measures used by the company may be calculated differently from and may not be comparable to similar measures used at other companies. These non <unk> financial measures should be.
Speaker Change: <unk>, along with but not as alternatives to the operating performance measures as prescribed per FRS. Please see a reconciliation between our non <unk> measures with directly comparable measures presented in accordance with IRS and our press release for discussion purposes.
Speaker Change: Our comments on growth are expressed in constant currency in a moment David will begin by recapping our highlights from the first quarter. After his remarks, Tim will discuss our performance and outlook for 2025.
Speaker Change: And then David will wrap up and we will open the call for Q&A with that I'll now turn the call over to our CEO David <unk>.
Speaker Change: Thanks, Dan and thanks, everybody for joining us today as we sit here in mid May it is remarkable to reflect on how dynamic this year has been so far.
Speaker Change: First we have begun a cascade of product launches that will grow our business for years to come punctuated by the launch of the entity Vcs in both Japan and the U S.
Speaker Change: Second we acquired a majority position to the great long term asset in Oregon, biotech with the potential to change the standard of care in colonial transplantation.
Speaker Change: And third there has been an obvious disruption of the global trade environment.
Speaker Change: And yet at Alcon I remain encouraged by the strength and resilience of our underlying business performance.
Speaker Change: So while the current tariff structure introduces new headwinds our global network of 17 manufacturing sites in decades of operational experience position us well to implement mitigating strategies and.
Speaker Change: In most cases, we make products in region for region and have the ability to transfer production across sites.
Speaker Change: However, our existing manufacturing footprint is optimized for a predominantly free trade environment shifting production across sites requires stable trade policy, along with time and capital.
Speaker Change: We will adapt to whatever final policy decisions are made but in the meantime, we continue to work with admin Med Med Tech Europe, and our local Chinese affiliate to advocate for a med tech exemption or zero for zero tariff regime.
Speaker Change: We remain deeply committed to access to eyecare is zero for zero tariff structure supports uninterrupted care by ensuring patients and providers can receive the products they need when they need them.
Speaker Change: In a few minutes, Tim will walk you through our thinking on the current tariff environment.
Speaker Change: Now I'll shift to discussing the first quarter, we delivered sales of $2 $5 billion in sales growth of 3%. We also delivered a core operating margin of 28% and core diluted earnings of <unk> 73 per share disc.
Speaker Change: Despite another soft quarter in the U S. Surgical market. These results are a testament to the breadth of our geographic footprint.
Speaker Change: And product portfolio as well as the commitment of our talented teams across the globe.
I'm pleased to report that at the recent American Society of Cataract refractive surgery Conference, we officially launched unity Vcs and pet optics pro.
Speaker Change: The entity launches a culmination of more than 10 years of work by our R&D and engineering teams informed by invaluable input by key opinion leaders around the world.
Speaker Change: I'd like to take the opportunity to thank all of our teams who have been involved in this transformational change.
Speaker Change: Next surgery.
Speaker Change: Yearly Vcs is a combined console for both Vitreoretinal and cataract surgery, while unit ECS is a standalone cataract system that will be available towards the end of the year the.
Speaker Change: The platform is designed to deliver superior efficiency for both types of procedures, while continuing to deliver exceptional outcomes and safety.
Speaker Change: The system features many first to market technologies designed to deliver transformative surgical innovation.
Speaker Change: For example, 40 FICO delivers twice as fast leads removal with 41% lower energy delivered to the eye.
Speaker Change: <unk> is the world's fastest detector and just wanted to have one five times faster than the existing best in class.
Speaker Change: Lastly, unity intelligent fluidics creates greater stability and control at each procedural step.
Speaker Change: Unity Vcs has received CE, mark and regulatory approvals in Australia, Japan, and the U S and we will begin delivering new units later this month.
Now I'll turn to Implantables, where we recently launched <unk> optics pro.
Speaker Change: We believe this next generation technology builds on our market, leading position and keeps us on the forefront of innovation.
Speaker Change: This lens builds upon the success of the world's most implanted trifocal PCI well by reducing the amount of light scatter by 50%.
Speaker Change: Our surgeon research suggests that life scatter is a key driver of <unk> is such as halos and glare, which is why we're so excited about pet optics broke.
Speaker Change: <unk> is now available in the U S and initial surgeon and patient feedback has been excellent. We look forward to bring it to select international markets later this year.
Speaker Change: Now I'll shift to vision care, starting with contact lenses I've been extremely pleased by the performance of all of our innovative lenses built upon our water gradient technology.
Our major recent innovations, including precision one family the totaled 30 family and dailies total one for astigmatism grew double digits in the first quarter.
Speaker Change: We launched precision seven at the start of this year and it's gaining traction with both doctors and patients.
Speaker Change: Whereas benefit from 16 hours of outstanding comfort, even on day seven due in part to our active flow system, which keeps lenses moist by leveraging a moisturizing agent in the lens with a replenishing agent.
Speaker Change: Additionally, whereas I appreciate the intuitive seven day replacement schedule, which enhances patient compliance and satisfaction offering a great choice.
Speaker Change: If a daily disposable <unk> is not an option.
Speaker Change: Brian care professionals. This lens allows them to meet diverse patient needs with a lens that balances innovation comfort and cost effectiveness.
Speaker Change: As a reminder, precision seven targets a reusable lens category, which we estimate is worth approximately $3 8 billion and where alcon is under indexed.
Speaker Change: Now I'll turn to ocular health will all start with sustained pro sustained pro is the only triple action multi dose preservative free formulation for all types of dry eye.
Speaker Change: Unique formulation includes higher around eight and offers patients up to 12 hours of relief.
Speaker Change: Additionally, the moisture technology helps reduce friction on the ice surface, providing both comfort and protection, while blinking and this can be a meaningful improvement for patients who experience irritation or discomfort with their current drops.
Speaker Change: Sustained pro has been available in the U S. Since February and we're continuing to expand its rollout to major retailers nationwide.
Speaker Change: Next I'll comment on our culture, among our dry eye pharmaceutical candidate we continue to expect an FDA response to our filing at the end of May in line with the Paducah date that we received last year our.
Speaker Change: Our team has been working hard ahead of the launch we've expanded our eyedrops salesforce in the U S. We now have a group dedicated to glaucoma and a separate group dedicated to dry eye.
Speaker Change: Additionally, we continue to engage with payers where appropriate.
Speaker Change: Now turning to <unk> activity, we have two recent exciting developments first I'm pleased to report that we acquired a majority interest in Oregon biotech.
Speaker Change: <unk> is at the forefront of regenerative medicine.
Speaker Change: The Companys flagship therapeutic candidate AUR in 001 has received breakthrough therapy and regenerative medicine advanced therapy designations from the FDA.
Speaker Change: It could represent a paradigm shift in the treatment of corneal endothelial dysfunction, which is a condition leading to corneal edema vision loss of potential blindness.
Speaker Change: 001 is an allogeneic cell therapy comprised of corneal endothelial cells derived from healthy donors and a rho kinase inhibitor that enhances cell survival and integration.
Speaker Change: 001 is administered as a single <unk> injection following a surgical intervention on the corneal endothelium.
This therapy offers a minimally invasive alternative to traditional corneal transplants, which are limited by donor availability and surgeon complexity.
Speaker Change: 001 is currently approved in Japan into the trade name does Nova in the U S. We plan to launch phase III clinical trial activities late this year and we aim to bring their product to market in mid to late 2028, given the scale of the unmet need we expect peak sales of a half a billion dollars or greater.
Speaker Change: Now we also entered into a definitive merger agreement to acquire <unk>.
Speaker Change: The acquisition includes the ally robotic cataract laser treatment system, we intend for this next generation technology to ultimately succeed <unk> as our Femtosecond laser assisted cataract surgery platform.
Speaker Change: We're excited for the opportunity to Britain bring lens. They are unique next generation technologies into our innovative equipment portfolio.
Speaker Change: The transaction is anticipated to close in mid to late 2025 subject to customary closing conditions, including regulatory approval.
Finally, I'll briefly discuss market dynamics for the first quarter.
Speaker Change: And cataract, we estimate the global procedures grew low single digits. Additionally, global <unk> penetration was up approximately 200 basis points year over year.
Speaker Change: In both cases, the main growth driver was international markets.
Speaker Change: And contact lens the retail market remained solid in the first quarter, we estimate that it grew approximately mid single digits in line with historical trends.
Speaker Change: I'll pass it to Tim will take you through our financial results and discuss our outlook.
Tim Stonesifer: Thanks, David our first quarter sales of $2 $5 billion were up 3% versus prior year.
Tim Stonesifer: This growth is slightly lower than recent trends and reflects approximately one point of headwind from our divestiture and out licensing of eyedrops to Archie mentioned in China in the fourth quarter of 2024.
Tim Stonesifer: In our surgical franchise revenue was up 2% year over year to $1 3 billion.
Tim Stonesifer: And <unk> sales were $420 million in the quarter in line with the prior period.
Tim Stonesifer: We saw another quarter of strong growth in advanced technology, <unk> in China and other international markets.
Tim Stonesifer: This was offset by soft market conditions in the U S that David mentioned earlier as well as competitive pressures.
Tim Stonesifer: And consumables are first quarter sales were up 6% to $712 million driven by <unk> and cataract consumables, particularly in international markets and price increases.
Tim Stonesifer: And equipment sales of $199 million were down 6% year over year.
Tim Stonesifer: Following the recent launch of unit of Etfs, we continue to expect equipment sales to meaningfully accelerate through the second half of the year.
Tim Stonesifer: Turning to vision care first quarter sales of $1 1 billion were up 3%.
Tim Stonesifer: Contact lens sales were up 4% to $688 million in the quarter, primarily due to product innovation as well as price increases.
Tim Stonesifer: As David mentioned, we continue to see strong growth across the precision one in total 30 families as well as dailies total one for astigmatism.
Tim Stonesifer: This growth was partially offset by declines in legacy products, where we have limited our promotional efforts. We also faced a strong prior year quarter, mainly driven by the timing of price increases.
Tim Stonesifer: An archive of the health first quarter sales of $432 million were up 2% year over year.
Tim Stonesifer: Growth was primarily driven by the sustained family of artificial tears as well as price.
Tim Stonesifer: There was also approximately three points of pressure, resulting from the device divestment of certain eyedrops to Archie mentioned in China that I mentioned previously.
Tim Stonesifer: Now moving down the income statement.
Tim Stonesifer: First quarter core gross margin was 63, 2% broadly in line with the prior year.
Tim Stonesifer: Core operating margin was 28% down 40 basis points, primarily due to increased investment in R&D.
Tim Stonesifer: First quarter interest expense was $49 million.
Tim Stonesifer: Brought in line with last year.
Tim Stonesifer: Other financial income and expense was a net benefit of $9 million also broadly in line with last year.
Tim Stonesifer: The first quarter average core tax rate was 21% compared to 23, 2% in the prior year period as last year included a net expense from discrete items.
Tim Stonesifer: Core diluted earnings were <unk> 73 per share in the quarter in line with last year on a constant currency basis.
Tim Stonesifer: Turning to cash we generated $278 million of free cash flow in the first quarter compared to $229 million in 2024 due to higher cash from operations.
Tim Stonesifer: Before turning to the outlook I want to take a few moments to address tariffs.
Tim Stonesifer: As we think about the tariff impact we are providing our best estimate based on a set of assumptions in an evolving environment.
Tim Stonesifer: As David mentioned, our global manufacturing footprint was built and optimized for a free trade environment.
Tim Stonesifer: And most but not all markets, we are fortunate to manufacturer in region for region how.
Tim Stonesifer: However, while we are able to relocate manufacturing shifting production intelligently requires a stable trade environment.
Tim Stonesifer: We've completed a thorough assessment of the current tariffs and mitigation strategies available to us. These.
Tim Stonesifer: These strategies include supplier diversification.
Tim Stonesifer: Optimizing our manufacturing network.
Tim Stonesifer: Managing discretionary spend and.
Tim Stonesifer: And implementing selective price actions.
Tim Stonesifer: As of today, we estimate that the gross impact from these tariffs will pressure cost of sales by approximately $80 million for the full year versus our outlook in February.
Tim Stonesifer: As the cost of tariffs are capitalized in the inventory and then flow into the income statement as goods are sold we expect to see nearly all of the gross impact in the second half of the year.
Tim Stonesifer: We expect to fully offset the tariff pressure through operational actions and currency tailwind.
Tim Stonesifer: Importantly, these estimates do not reflect any potential impact related to future tariffs and trade policy changes.
Tim Stonesifer: Now moving to our outlook for the remainder of the year.
Tim Stonesifer: Our current guidance assumes that the aggregate global eye care market grows approximately 4%.
Tim Stonesifer: That exchange rates as of mid May hold through year end.
Tim Stonesifer: And that the tariff rates and exemptions announced as of May 12 persist through the end of the year.
Tim Stonesifer: Now starting with sales we are updating our full year revenue guidance to $10 four to $10 5 billion, which reflects the favorable foreign exchange environment.
Tim Stonesifer: Additionally, given the soft U S. Surgical market, we are updating our sales growth rate guidance to between six and 7% in constant currency.
Tim Stonesifer: In terms of phasing, we continue to expect sales growth to meaningful meaningfully accelerate in the second half of the year given the timing of the new product launches.
Tim Stonesifer: Moving to operating expenses, we expect incremental R&D expense following our recent BD Enel activity. However, we expect to remain within a range of 8% to 10% of sales.
Tim Stonesifer: Additionally, we expect SG&A to step up in the remainder of the year, we expect the highest spend in the second quarter due to normal seasonality and the timing of new launches.
Tim Stonesifer: Turning to profitability, we now expect full year core operating margin to be between 20 and 21%.
Tim Stonesifer: This updated range reflects approximately 80 basis points of pressure from recent BD enel activity versus our February outlook.
Tim Stonesifer: Moving down the income statement.
Tim Stonesifer: Following the consolidation of <unk>, we now expect non operating income and expense to be between 185 and $205 million.
Tim Stonesifer: Turning to tax we continue to expect our full year core average tax rate to be approximately 20%.
Tim Stonesifer: Based on all of these factors, we now expect our core diluted earnings guidance range to be between $3 five.
Tim Stonesifer: $3 15 per share.
Tim Stonesifer: This updated range reflects a 10 cents of impact from recent BD Enel activity.
Tim Stonesifer: This range corresponds to year over year growth of between 2% and 5% in constant currency.
Before I wrap up I am pleased to announce that our annual general meeting last week shareholders approved a dividend of 28 <unk> per share in line with our payout policy of 10% of the previous year's core net income.
Tim Stonesifer: And I, thank our shareholders for their continued support.
Tim Stonesifer: And finally I want to take a moment to thank our associates across all levels of the organization your dedication and focus continue to drive our performance and position us for long term success.
Tim Stonesifer: So to conclude we remain confident in the long term fundamentals of the eye care market and our business.
Tim Stonesifer: 2025 is a watershed year for us, we're bringing a wave of groundbreaking products to market each designed to help improve site.
Tim Stonesifer: Set new standards of care.
Tim Stonesifer: These launches reflect the strength of our pipeline, our deep understanding of customer needs and our commitment to shaping the future of eye care.
Tim Stonesifer: Our continued investment in research and development, along with strategic acquisitions further fuels, our innovation engine and expands our capabilities.
Tim Stonesifer: And we're excited about what's ahead and confident in our ability to drive long term growth through purposeful market leading innovation.
Tim Stonesifer: We appreciate your continued support and look forward to updating you on our progress next quarter, so with that let's open the lines for Q&A.
Tim Stonesifer: Thank you we will now be conducting a question and answer session. Please limit yourselves to one question and one follow up if you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to remove your question from the queue.
Tim Stonesifer: For participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys My.
Tim Stonesifer: One moment please poll for questions.
Operator: The first question is from Veronica Dubai Joseph from Citi. Please go ahead.
Speaker Change: Hi, guys. Good afternoon, and thank you for taking my questions I have two please first one is just on the shape of the organic growth rate through the remainder of <unk>, Ken I can push you a little bit more on sort of how do we get from the three to the sixth shattered.
Speaker Change: Could you give us a bit of flavor on where you expect the second quarter to land and just how much faster growth in the back half of the year is going to be kind of what is the biggest moving forward our Q1.
Speaker Change: I'd add to that growth acceleration in your degree of confidence in that.
Speaker Change: And then if I can follow up here go ahead, Jim actually I'll do my follow ups.
Speaker Change: Well first of all welcome back <unk>.
Speaker Change: Yes. So again this plan. This plan has always been based on growth acceleration in the back half of the year driven by the cadence and the timing of the product launches. So I'm not going to give Q2 guidance, but what I. What we do feel very comfortable with is this we will see call. It high single digit revenue growth in the back half of the.
Speaker Change: And what's going to drive that unity Vcs, we're very excited about Pan optics Pro you look at precision seven and sustained pro so as we've talked about in the past a lot of these launches are coming out in the back half of the year and we would expect that too to take us to the 67% revenue growth for the total year.
Speaker Change: Got it that's helpful. And then my follow up probably more for David but I think one of best set of quarterly investor concerns out there that we hear a lot in our conversations.
Speaker Change: U S cataract market continuing to be healthy gains and are you confident that ctrip and market issue or is this also a competition issue. So I'd love to get your thoughts David.
Speaker Change: Why are we not seeing that required a train here.
Speaker Change: How comfortable are you with the assumption that you can maintain yourself.
Speaker Change: You have competitive advantage in so far in the premium.
Speaker Change: Thanks.
Speaker Change: Well, thanks, Ron I can again welcome back listen I think the sure thing I think we feel pretty good about where we're pretty much on where we had expected to be the market is a little surprisingly soft I think in the first quarter to us I think we have seen that really in the third and fourth quarters as we mentioned so to see it again in the first we'd hope not to obviously we've adjusted.
Speaker Change: At our market.
Speaker Change: To about a 4% growth for the year as a consequence.
Speaker Change: I think I think as we wrap around last year, we're going to see a much better.
Speaker Change: Growth rate to begin with but at the core of it. This is a surgeon productivity issue because there's tons of cataracts are not being done we know that wait lines. For example, weightless are getting longer we know that the surgeons.
Speaker Change: Some of the busiest surgeons in.
Speaker Change: The country has generally been the target of private equity acquisitions and when they do that they are generally retiring or taking a step back.
Speaker Change: And it takes a little while for the younger guys to come along and fill up the volumes and the skill set that they're losing so we've heard kind of consistently that.
Speaker Change: While we are improving efficiency per surgeon, it's not yet where it was and I do think the beauty of that for US is we're launching unity vcs right into that.
Speaker Change: Circumstance, where we're going to be telling people look if you do this and use this properly you can do more surgeries in a day, whether that's <unk> or whether that's cataracts.
Speaker Change: Do you think that the cataract market normalizes over time I feel like we've seen over the years pretty consistently in the U S. A 3% growth I expect that to return to normal the rest of this year.
Speaker Change: Excellent thanks, guys.
Speaker Change: The next question is from Jack Reynolds Clark from RBC capital markets. Please go ahead.
Hi, there thanks for taking the questions first one I had was on contact lenses.
Speaker Change: I was wondering if you could break down the impact of the kind of the.
Speaker Change: Yes.
Speaker Change: The timing differences.
Speaker Change: Pricing.
Speaker Change: It's kind of legacy product declines in the quarter and then what that means for the exit rate coming out of Q1 than what you've seen so far in Q2.
Speaker Change: Yes.
Speaker Change: I won't comment too much on Q2, but let me just talk about where we are with the quarter on contact lenses look the audited data around the world. It looks like it was a very healthy market and I think that should be encouraging to people because the consumer looks healthy U S. There was there was unit growth there was mix trade up there was price in the market and the market grew in the U S about seven.
Speaker Change: <unk> percent. So we're still seeing that kind of mid single digit growth globally, and we expect that to continue for the year now for our number we were wrapping around 11% growth last year, we're doing a sequential growth from fourth quarter to first quarter. At we finished 11%. So we do a 4% if you look at that on average.
Speaker Change: Accommodating pricing volume movements that accommodate price increases last year, we pulled a little in last year.
Speaker Change: Last quarter, we pulled a little and so it just moves around a little bit across the quarter I would think about this is normalizing.
Speaker Change: <unk> normalizing above market growth and we expect market growth to be in the kind of mid single digits range.
Speaker Change: Yes.
Speaker Change: That's great. Okay. Thank you and then.
Speaker Change: Oregon.
Speaker Change: And then your guidance implies a fairly substantial EBIT loss from Oregon, I was wonder if you could give a breakdown of.
Speaker Change: What is comprised within that cost.
Speaker Change: The breakdown of clinical trial with Vestas R&D versus kind of more standard Opex and then what your expectations are for clinical trial costs and 226 through 2020, when the product launches.
Speaker Change: Yes, I think you've got the numbers right. Its about $80 80 bps. This year and again, it's almost all R&D. So I would I would think about it really is.
Speaker Change: R&D and progress, we generally don't break apart our clinical activity.
Speaker Change: Our R&D core R&D stuff, so I would.
Speaker Change: Probably avoid doing that today on this particular topic I would say that we're excited about this program that we will take it into <unk>.
Speaker Change: Clinic late this year and we're excited about the response, we've gotten recently from the FDA on the on the trial progress. So I think we have good alignment with FDA at this point and I think excellent folks running this program. So we're excited about the team and the program. Because this really is one of the things that helps patients a lot. It's a big deal I mean this is <unk>.
Speaker Change: Corneal transplant folks that can't really get to that around the world unless this product succeed. So we're excited about the program in the.
Speaker Change: And the folks and then Jack maybe to help you out for 2025 I would just.
Speaker Change: If youre looking at your models I would model that into your R&D and I would just phase it evenly between <unk> and <unk>.
Speaker Change: Okay understood and should we expect to open this next year.
Speaker Change: We'll give you guidance next year on it it'll be it'll be part of a blended R&D program, we won't break out the program specifically, we generally don't do that.
Speaker Change: Understood. Thank you very much.
Speaker Change: The next question is from Graham Doyle from UBS. Please go ahead.
Graham Doyle: Good morning. Thanks, guys. Thanks, taking my questions just kind of follow up on <unk> question. I know you don't love to do a quarterly guidance, but I think it's not unfair.
Graham Doyle: Sorry to ask it given we've had a downgrade on revenue guidance for Q3, and we have had now on the back of the capital markets day on our recent guide so just trying to understand the things that give you confidence on this acceleration rod presumably we're looking at.
Graham Doyle: Five or something in Q2, and then up seven or eight or something as we exit the rest of the year. So is it that you've got a really strong order book already for unity.
Graham Doyle: Are you seeing great traction with <unk> pro just to give us some concrete piece of that underpin your assumptions will be super helpful. Please.
Graham Doyle: Well, let me, let me start with the market I mean, the reason for the narrowing of the range and again I think we're comfortable with what we said.
Graham Doyle: It was the first quarter I mean at the core of the U S market was soft in the fourth quarter. When you do the math on that you would take it forward.
Graham Doyle: It's going to be unrealistic I think to get the acceleration we need to get to an eight on the other hand, we feel really good about 6% to seven and we feel like maybe we do better than that but thats really theres still a lot of variance in the new product flow. So.
Graham Doyle: Starting with the basics on this.
Tim Stonesifer: The second quarter, we think is a normal quarter I think it should be roughly around market is a little bit better than market growth and then as you kind of work your way into the back half of the year I think Tim just said, we're going to see steady significant acceleration through the third quarter and into the fourth quarter, because remember we haven't shipped any pent optics pro till this month, we haven't shipped any.
Tim Stonesifer: The vcs until the end of this month, we havent shipped a whole bunch of.
Tim Stonesifer: The pent up its pro to the retailers until really getting through the end of first quarter. So you really haven't seen any new product flow other than P. Seven hitting right now and maybe sustained pro a little bit.
Tim Stonesifer: But I think as you get through all of that really the massive kind of massive kind of substantial change in trajectory occurs on the back of a very strong reception to unity Vcs are very strong reception to Voyager a very strong <unk> output on Pan optics pro.
Tim Stonesifer: We got preorders in Japan on <unk> Dcs, we feel good about so yes, we have a lot of preorders, we need to fill those and we will do that over time, the only gating factor I feel like on unity Vcs will be our ability to kind of install it make sure. We ship. It on time make sure everybody uses it correctly make sure we take the time that's required to get the most out of that machine.
Tim Stonesifer: Because it is genuinely a phenomenal piece of equipment and we've consistently heard that there is a lot more to it than that so we're launching seven new products, maybe more than that actually when you get into the specifics of smaller so theres just a lot going on Graham and I think.
Tim Stonesifer: It just doesn't play out in the front half.
Tim Stonesifer: I think the other way we've been describing this in prior calls as we think they are about 30000 units out there to 10 year lifespan. So we've kind of said hey look feathered in 3000, a year front half.
Tim Stonesifer: First couple of years or probably a little bit more than that back half would be a little bit less than that so if you do that kind of math and then you layer that into the back half of the year, that's going to give you a nice revenue lift. So that's just if you want to try to do it numerically.
Tim Stonesifer: Try to do that kind of math and Youll see that we get some pretty nice revenue growth or we expect some pretty nice revenue growth.
Tim Stonesifer: Okay, that's really helpful.
Tim Stonesifer: Got it.
Tim Stonesifer: Quick cheeky one would you just do you guys have visibility on that you'd like to keep those preorders and have that flowing through and early indications does that give you. The comfort on Q3 Q4 is that kind of where that's coming from rather than just.
Tim Stonesifer: It's a great product in the market should take it as is there a good indication of interest to a reasonable level that gives you that comfort.
Tim Stonesifer: Yes.
Tim Stonesifer: Alright, Thanks, a lot I'll jump back in the queue.
Speaker Change: That was a cheeky answer to it.
Graham Doyle: Thanks Graham.
Speaker Change: Thanks, guys.
Speaker Change: The next question is from Ryan Zimmerman from <unk>. Please go ahead.
Ryan Zimmerman: Good morning, or good afternoon.
Ryan Zimmerman: Thanks for taking my question when we think about the components of guidance the market, obviously down 50 basis points from your prior assumptions embedded within that 67% of about 250 basis points from innovation, new products and within those 250 basis points I assume with some price impact so I'm wondering Dave.
You can kind of parse out in terms of how you're thinking about price versus new product contributions within that incremental 250 basis points for the year and then I have a follow up.
Ryan Zimmerman: Well I mean, I would think about the year in total as getting the typical price we get I mean, I would think about it is we're getting typically a couple of points of price every year. If we can keep up with inflation, we're pleased with that.
Ryan Zimmerman: And I think Thats, typically where were trying to get to so I would think about that versus the rest of the unit growth and trade up and I would think about new products is the gap fill and there is a lot of enthusiasm around the products right now I think I just came off of the two.
<unk>.
Ryan Zimmerman: A major meetings.
Ryan Zimmerman: In Japan in Tokyo, and then also in Los Angeles, We had the largest surgeon meeting in the world for the U S that was.
Speaker Change: <unk> around the product flow that we have right now is very significant and I think we.
Speaker Change: We need to execute and we've got a lot to do but I would just say I feel really good about where we are for the remainder of the year.
Speaker Change: Okay and then.
Speaker Change: Tim I think you called out SG&A being highest in <unk>, but.
Speaker Change: Sales are arguably going to be higher in the back half of the year I'm, just curious kind of why we wouldnt see a higher SG&A rate.
Speaker Change: In second half given kind of the pacing and again the top line.
Speaker Change: Cadence if you will.
Speaker Change: Yes, there are really three factors in that in that Q2 comment I mean first of all if you just look at seasonality.
Speaker Change: We do we have a lot of advertising on promos, particularly around the DTC.
Speaker Change: So if you were to go back to say 'twenty two 'twenty three 'twenty four the average incremental spend Q1 to Q2 is roughly 40 million Bucks. So again thats typical seasonality I would expect that to hit again in Q2 of this year and then there are really two other things. The one is that we did have some phasing.
Speaker Change: From Q1 to Q2, we had some favorability in Q1 that we werent anticipating those costs will come through in Q2, I'd call that maybe 15 million Bucks or so and then lastly, we have the investments behind the product launches. So we talked a lot last year about how much we're investing in the products and we want to make sure that we invest appropriately to drive that revenue growth. So.
Speaker Change: Youre going to see that starting to hit in Q2, and then as you get to Q3 Q4 kind of back out that DTC piece wherever you put in there for that and then it will start to normalize.
Speaker Change: Okay. Thank you.
David Saxon: The next question is from David Saxon from Needham <unk> Company. Please go ahead.
David Saxon: Great. Good morning, Thanks for taking my questions, maybe two product related questions.
David Saxon: First one is just on the Panopticon pro and how youre thinking about that launch relative to the your competitors recall and now relaunched has that created any meaningful opportunities.
David Saxon: Okay.
David Saxon: Drop.
David Saxon: Okay.
David Saxon: But we are starting to lose yet.
Speaker Change: Yeah, Hey, David you got kind of garbled, there a little bit.
David Saxon: Okay.
David Saxon: Okay.
David Saxon: No no.
David Saxon: Not really.
David Saxon: Alright, well here, let's try it you got it we got you know okay.
David Saxon: Yes.
David Saxon: Thanks.
David Saxon: Now last year.
David Saxon: So let me do let me do pent up X Pro and then I'll if you'd come back on we can take will take another one.
Speaker Change: Has that created any.
David Saxon: And then.
David Saxon: So why don't we why don't we move on to the next one let me take the priority. Okay. If I could handle that so look.
David Saxon: David on Pent up X Pro we're we're obviously excited about that one of the things I said in the opening remarks was the.
Speaker Change: The big thing in Hol's, particularly try focus has been halos and glare, it's something that we've been working on for a while.
David Saxon: Panoptic pro.
David Saxon: Has 50% less scatter, which is really the source of halos and glare. So we expect to see.
David Saxon: Really important.
David Saxon: Uptake as a function of using more light in the lens and I think thats been a really exciting thing it's been well received.
Speaker Change: Certainly it was railroad received in Los Angeles, and I think we.
Speaker Change: Expect surgeons are going to try it a relative to VL recall I really wouldn't comment on that I think they are back in business, they're going to be a fierce competitor no matter, what and we're obviously excited about what we've got.
Speaker Change: Okay, great. Thanks for that and then the second one is just on the.
Speaker Change: The <unk> date coming up in a couple of weeks now I guess once you hear on that or get the response what is left to do before the launch can you get that out in late second quarter here in a limited fashion at least or would that fall into the third quarter.
Speaker Change: And then I mean, I'm, assuming all of that investment is baked into guidance, but anything to call out.
Speaker Change: Other than Tim what you just said around SG&A for the second half. Thanks, so much for taking my questions.
Speaker Change: Yes of course.
Speaker Change: Youre <unk>.
Speaker Change: You're right about the incremental investment.
Speaker Change: Mostly and we commented on the sales Force addition, that's obviously a big part of the investment we will have back loaded investment as well for 502, which will support that launch we do think the launch will happen it will happen probably in the third quarter, but late in the third quarter, we have to manufacture it we got to get the Pis and the labels all put together so obviously.
Speaker Change: We will get to do that until we get the final word and agreement with FDA on what those labeling will look like so.
Speaker Change: Look for that late third quarter, and so there'll be a limited effect this year.
Speaker Change: Great. Thanks, so much.
Speaker Change: The next question is from Larry Pete Wilson from Wells Fargo. Please go ahead.
Speaker Change: Hello, Good morning, Thanks for taking the question.
Speaker Change: Guys. This is the latest in the call that a tariff question I think has come up.
Tim Stonesifer: In Q1 earnings so alright, so here's the tariff question Tim.
Tim Stonesifer: Quarterly cadence I assume it ramps through 25, so will Q4 be.
Tim Stonesifer: The highest impact and lowest gross margin of the year and how should we think about the annual impact for 2025 can you still grow margins year over year.
Tim Stonesifer: Given given the tariff impact and I had one follow up.
Tim Stonesifer: Yes, as I said in the prepared remarks, the gross impact of the tariffs will be primarily in Q3 and Q4 and that's because when you incur the tariff you put it in you basically amortize. It. So it takes time to work its way through the P&L. So we've obviously, we've said that we will offset that.
Tim Stonesifer: 2025, so we do expect margins to be pretty close to what we guided at the beginning of the year.
Tim Stonesifer: And then as we get into 2026, we will give you more color then there will probably be if these were to stick for the full year.
Tim Stonesifer: You would have an annualized impact so you'd have more gross pressure.
Tim Stonesifer: Pressure, but at the same time, you would also have probably more mitigation efforts, whether it's pricing, whether it's manufacturing movements or things of that nature, which we would obviously prepared for but we're sort of looking for a stable environment before EDA stable environment before you start making a lot of those moves.
Graham Doyle: Alright, and Tim you gave some long term goals at the capital markets day, a few months ago.
Speaker Change: How does the change in the macro environment, including the tariffs.
Graham Doyle: The outlook, especially the 12% to 15%.
Speaker Change: Ex FX core diluted EPS growth.
Graham Doyle: Thanks for taking the question.
Graham Doyle: Yes, listen we still feel good about our long term goals those goals are five year goal. So obviously there has been we have a very dynamic environment as we speak here today, which is very different than it was last quarter, which may be different next quarter. So I would say long term, we feel very good about the fundamentals of the business, we're going to continue to invest in innovation and we see.
Graham Doyle: That if we do that we will grow faster than the market whatever that market right. As we obviously have demonstrated in the past that we have a very good handle on our cost envelope will can't will continue to manage that responsibly and when you grow faster than the market and manager costs responsibly Youll get margin expansion that drops down to free cash flow. So we feel very good.
Graham Doyle: All of that.
Speaker Change: Alright, thanks, so much.
Okay.
Speaker Change: The next question is from Patrick Wood from Morgan Stanley. Please go ahead.
Patrick Wood: Beautiful thanks, guys I'll keep it to one.
Patrick Wood: Loved the commentary on the contract side around what Youre seeing on the consumer I'd love to sort of dig in a little bit between counteract and contact in the different regions, what you're seeing whether it's that mix of new fittings.
Patrick Wood: You mentioned the data on the U S side, which we get but how is that looking in EMEA. For example, and then when we think of the iOS side, how we are thinking about the marginal mixed Sara.
Patrick Wood: Are we seeing people shift to like mono parcel femto or is that not a thing I'm just anything on the consumer and the marginal kind of volume mix Super interested that thanks.
Patrick Wood: Yes, let me just say that the international market has been very solid really all of last year and through the first quarter certainly.
Patrick Wood: Solid pretty much everywhere, we've seen a few the contact lenses, Jeff Japan is soft in the market I think it's been.
Patrick Wood: Low single digits.
Patrick Wood: But on the other hand, we've seen some real growth.
Patrick Wood: Areas.
Patrick Wood: In the United States and a few other markets that have done well.
Patrick Wood: I think the.
Patrick Wood: The expectation the surprising thing maybe to some and I think we've said this historically is that the consumers relatively well positioned at this point I would make two points on that one is our contact lens mix on units was up and our unit volumes were up so there wasn't in the first quarter at least there was a pretty healthy U S consumer.
Patrick Wood: And international consumers, so all around the world that seem to be pretty okay.
Patrick Wood: That tells you a little bit more about just this business, which is people who wear contacts get used to wearing them and they stay in them and so I think thats just the nature of the resiliency of these markets. The second one is just on the ATI wells and I do think again, there's always been some question or commentary about well what do we see in the hol penetration and around the world.
Patrick Wood: We saw 200 basis points of movement up in Agi well in the first quarter. So these are people who are choosing not to get mono focal lenses and to pay out of pocket for <unk>, which again is healthy as you know we have we are two thirds of the U S <unk> and we have more than half.
Patrick Wood: The total <unk>, so when the market moves to <unk>. That's a good thing in the U S. It was up 100, and some odd basis points internationally it was up more than that.
Patrick Wood: China, obviously is helping the international market, a lot, but really kind of across the board Europe.
Patrick Wood: And a number of other markets, where we're really solid on that point. So I would tell you that.
Patrick Wood: The regional mix with the exception of the productivity issue, we observe in the market in the U S. We feel pretty good about the fundamentals in the market and this thing in the U S. We're just going to have to Wade through I think there is a turnover of surgeons that are going to require the younger surgeons to pick up their game, a little bit and I look forward to helping them I think we've got some really great assets.
Patrick Wood: Two to move them forward and I think if you look at what Voyager does for productivity. If you look at what unity Vcs does for productivity. When you look at what broken due for conversion. These are things that help productivity in the office and I think that's that's where we're headed.
Colin: Thanks Colin.
Speaker Change: The next question is from Anthony Petrone from Mizuho Group. Please go ahead.
Speaker Change: Alright, Thanks, maybe two product questions here.
Speaker Change: A little bit on <unk>, seven we're doing optometrist checks and.
Speaker Change: We're actually coming back quite positive on on page seven.
Speaker Change: So maybe just.
Speaker Change: Where that product is tracking in terms of expectations for 2025, and then the second product question would be on.
Speaker Change: <unk>.
Speaker Change: 1512, just in terms of Brian maybe just a recap on David how that product is differentiated versus competition.
Speaker Change: And when you look at that overall Tam opportunity in the United States.
Speaker Change: Couple of years out what do you think are reasonable.
Speaker Change: Sure expectation could be for that product in U S trial. Thanks.
Speaker Change: Yes.
Speaker Change: Thanks Anthony.
Speaker Change: Im glad youre doing the channel checks, we do too and I think it really does give you the kind of positive vibe that I think youre getting.
Speaker Change: We talked to a lot of folks on piece of it we did a lot of work ahead of this you will remember that we had this product approved for about a year before we launched it we had to convince ourselves that was real market out there I think we're seeing just that I think it's a more intuitive thing for docs to say Hey look put this thing on Monday, it's going to feel great all week.
Speaker Change: And then replace it on the following Monday and that is just way more intuitive they feel better about getting.
Speaker Change: Patients out of the two week lens, where they may or may not remember what they were going to do with it when to take it out how long they were at.
Speaker Change: It's just a lot more comfortable and it's at a price point that works and so look it you cant get somebody into a dailies lens, which is really the game right. Most people want to get into and get them into the Si Hy daily lens, but that's not for everybody not everybody can afford it and you know what this is priced correctly. It does a lot for the patient and I think we're seeing very nice responses, it's really important to remember that.
Speaker Change: Even though 60% of the value in our maybe 65% of the values of the dailies lenses in dollars.
Speaker Change: <unk>, 55% of the patients are still in reusable and that matters. So we're under indexed there. So I think that's a real opportunity for us we see it progressing and nicely. So far on five one to look this is a very unique product I mean, this is different than pretty much everything else out there that's been out there thats out there now because.
Speaker Change: It's not an anti inflammatory and it's not a supplement this is a product that is an agonist for natural tear production and so very quickly when this product hits. The <unk>. It is creating natural tears and we're excited about that and we think thats a very different proposition that goes to the core of the problem and so if you can solve the <unk>.
Speaker Change: You don't need to worry about the anti Inflammatories, because you don't need them and you can solve the problem you don't need a supplement because you don't have.
Speaker Change: Tier deficiency of any kind so what's exciting about the data. We're creating is I think we're creating enough data around us to get very convinced that this is an exciting opportunity.
Speaker Change: And look I mean, the market as you know is quite large in United States.
Speaker Change: And we were excited to see some of the competition that are branded products do well because I think that tells us that theres a reimbursable market out there for us. So again I wouldn't change our outlook on this I think we're still in that kind of $2 50 to 400 is what we've been saying I'll stay there, but I'm probably on the higher end of that one now.
Speaker Change: That's what we like and we will see as it hits the market, where it goes from there and I can update you as we get through that.
Speaker Change: Thank you.
Speaker Change: The next question is from Tom Stefan from Stifel. Please go ahead.
Tom Stefan: Great Hey, guys first question on contact lenses.
Tom Stefan: Did you sound confident in the end markets holding solid legacy lenses seem to be I think one of the incremental headwinds in the quarter can you just help us with how we should think about that part of your portfolio rest of the year for contact lenses more broadly are there any factors. Besides T. Seven that can help drive a reacceleration.
Tom Stefan: And then my follow up.
Tom Stefan: Yes look I mean, I think you I wouldn't read too much into the first quarter contact lens number I really would I think you've got some comp issues in there and you've got some price overlaps that has really caused.
Tom Stefan: A different number than what was really happening I think in the market what youre asking is a really good question, because we're seeing tremendous leverage in our new product. So we're getting great share motion on.
Tom Stefan: Daily Si Hy sphere daily Si Hy toric.
Tom Stefan: Reusable, we're getting share movement, and it's causing the hemo market, which is of course, our DSP and to a lesser extent, our optics brands, our legacy brands to decline and that is an offset I.
Tom Stefan: I think we've been doing that now for I think ever since we started we've been saying look we're going to move through a phase where the legacy brands go away and the new brands take over one of the things you should observe is that the legacy brands and the reusable in particular.
Tom Stefan: <unk>.
Tom Stefan: Or sorry, the new brands and the reason was in particular drive the margins. So if you've looked at the segment margin, you'll see us moving up nicely and the gross margin area. That's a beautiful thing that's because we're moving people from old products, where the volumes are declining and the costs are going up to new brands, where the costs are coming down and the volumes are going up so we continue to.
Tom Stefan: To try and change over our line. If you will we're doing that pretty efficiently right now, but again I think it will always be a little bit of a drag until those legacy brands kind of retire.
Tom Stefan: And this business that generally takes.
Tom Stefan: A long long time, so we will see a little bit of drag there, but generally we're going to outperform the market on a consistent basis going forward read the market is mid single digits.
Speaker Change: Got it Super helpful. And then pivoting to <unk>, David I'll stick with you by I think you alluded to maybe not seeing much of that was from a share standpoint outside your expectations, just a little surprised to hear that given odyssey momentum as premium portfolio.
Tom Stefan: Performing well.
Tom Stefan: It's still growing nicely.
Speaker Change: David can you just dig a little deeper into why you still feel good about U S share today, and if you are able to provide me any sort of quantification that would be great. Thanks.
Speaker Change: Well I mean, I think I said it on the market.
Speaker Change: We're two thirds of the U S <unk> market today.
Speaker Change: And Thats after last 18 months or 24 months of competition from just about everybody in the world.
Speaker Change: So I think what you what you would observe I think is that things like Penn optics indemnity.
Speaker Change: Are very durable very competitive products in a market where most of the competitors are 150 100 to $200 cheaper and so there's a market there is always going to be a market for less expensive.
Speaker Change: I think what Youre seeing right now is a movement people trying lenses and people some people staying with them because they're good lenses, there nothing wrong with them, but they aren't as good as what we think we can deliver and I think thats. The I think that's where people get real comfortable when you've seen millions of lenses implanted and great results consistently and then you improve that.
Speaker Change: With pro I think that's why people stay with us and obviously, we have a very large footprint in the surgical market and so when you go into an or you see a lot of our equipment, you'll see a lot of our reps you see a lot of our energy in there and I think there's a real loyalty to what it is that we do here and I think thats part of why we hang on to share.
Speaker Change: A little bit better than most now look I mean have we lost share of course, but we were sitting at I think 85 at one point I mean, it was we were always going to lose share and that was just a question of how much and at what pace. So.
Speaker Change: None of that is really surprising and maybe the one surprise that people just kind of under call as the amount of growth. We've created internationally I mean, I think our share growth in international in a number of spots, but particularly China has been really really strong.
Overall, our shares relatively flat, we've just basically traded share internationally for share in the U S and of course that price trade is not positive. So that's I mean, you're kind of coming up in one market and you're coming down the other one because one started all on its own and the other one was already in our competitive set when they started so just I guess, that's the color around this.
Speaker Change: Why we think it's kind of as expected.
Speaker Change: Thanks again.
Speaker Change: The next question is from Brett <unk> from Keybanc capital markets. Please go ahead.
Speaker Change: Hey, guys. Thanks for taking my questions. Most of mine have been asked so I'll ask a little bit of a nitty gritty question here just noticed that in the guidance provision.
Speaker Change: ADB point headwind was attributed to both business development activities and licensing so it sounds like the <unk>.
Ari on development costs is a good portion of that just curious if there was like another element on the licensing side or anything else that was going into that broader headwind. Thank you very much.
Speaker Change: Yes, it's mostly our and I think the vast majority is but there wasn't that we acquired.
Speaker Change: An asset called satellite.
Speaker Change: During the quarter as well you can find out the notes again.
Speaker Change: We had a little bit of a licensing work in there as well.
Speaker Change: The next question is from Ian <unk> from Jefferies. Please go ahead.
Ian <unk>: Alright, great. Thanks for taking my question.
Speaker Change: Maybe one more just on <unk>.
Ian <unk>: <unk>.
Ian <unk>: On the competitive Trialing dynamics how.
Ian <unk>: How much are you still seeing currently.
Ian <unk>: How long do you expect that to persist and 25, and then are you going to be trialing.
Ian <unk>: Panoptic pro as well to support the launch.
Ian <unk>: So.
Ian <unk>: Yes, we're continuing to see sampling I mean, it's it.
Ian <unk>: Comes in waves right when the new products come.
Ian <unk>: Take.
Ian <unk>: Three to six months to get people, who want to try it through that process.
Ian <unk>: I think you see kind of successive product after successive product coming into the U S market. So there are probably four or five now.
Ian <unk>: Now that had been in and each one of them will bring samples with them. So we've been we expect that to continue I mean, I think they are I think there'll be another J&J launched next year, we will see some more trialing going on later this year I am sure and so again I think that's probably a factor in it.
Ian <unk>: Some of this but I think a diminishing factor kind of for the next probably 12 months or so.
Ian <unk>: Alright, very helpful and then.
Ian <unk>: I guess our Voyager.
Ian <unk>: Yes, we're really positive.
Ian <unk>: On the demo.
Ian <unk>: Efficiency really jumps out for both the top and staffing.
Speaker Change: Thank you are scaling manufacturer for it now, but whats your thoughts on the pathway to making it the standard of care.
Great question look I think.
Speaker Change: <unk> stand alone I think is the standard of care I think the challenge is how do we get it to actually be.
Speaker Change: B occur at the same rate people believe it should occur and so that's the magic I think of Voyager.
Speaker Change: As we get it kind of out and going there is an emerging consensus around <unk> is the first thing to do because it keeps people off drops it's easier it's a good place to start.
Speaker Change: And so for the patient and for the for the Doctor that seems to be a growing consensus that we see and I think what youre going to find is that as we get this product out and as more people get the chance to use an experience it and as they get a confidence that it's really driving pressures down and it does then I think.
Speaker Change: That is going to really help drive that standard through I do think that there is a new publication I think coming shortly on this product and that will also help again I think it demonstrates a similar kind of response to core <unk>, which is what we've been looking at only this is a lot more efficient obviously for for the surgeon so.
Speaker Change: For the glaucoma geologist or general ophthalmologists. So we expect a lot of positive coming on this one we are we are manufacturing it right now.
Speaker Change: In Israel, and we are moving that manufacturing to the U S. As well so we'll have dual.
Speaker Change: Locations for that but.
Speaker Change: For that product. So we're excited about getting all of that movement.
Speaker Change: Alright, thank you.
Speaker Change: Yeah.
Speaker Change: The next question is from Jeff Johnson from Baird. Please go ahead.
Jeff Johnson: Thank you good morning, guys.
Speaker Change: Yes, Tim one question for you just on the Implantables business can you remind us where we are in the phasing of the BBT tailwind that you've been getting and I know they've been very helpful. The last couple of quarters when do those start to moderate versus the Pan optics pro tailwind starting to kick in do you feel like this zero percent Implantables number we saw in the first quarter or are we at.
Speaker Change: The trough should we see some sequential improvement in those year over year growth rates over the next few quarters and then I have one follow up thanks.
Speaker Change: Well I mean, I would read the implant number as a function of the U S market largely being very suppressed.
Speaker Change: That has had more of an impact than anything else I would read.
Speaker Change: Going forward the Pvp will have.
Speaker Change: Tailwind through probably the end of next year.
Speaker Change: Sorry end of middle.
Speaker Change: Mid part of next year, and then it probably it turns over assuming they do it on time and again Theres been some second runs at.
Speaker Change: China, Vips, where the national GDP doesn't come on time. So we will see I think the scheduled time is for the middle of the year, we'll see what happens actually there.
Speaker Change: But I think Jeff if your question is like this quarter in our phasing perspective on of EVP. If youll recall Q2 of last year is when we started.
Speaker Change: Stocking distributors, so I think from when Youre looking at a year over year and 25 versus 24, I think it starts to normalize in Q2.
Speaker Change: Yes, that's kind of how I had in my model and that's my I guess my concern is do we think implantables to dip even from here. This level before we start back on our recovery is fantastic pro build throughout this year.
Speaker Change: Or are we kind of near or at trough at this point.
Speaker Change: I'd have to look at that in some specificity I think directionally, we continue to grow share.
Speaker Change: Year on prior year, so the actual consumption.
Speaker Change: Would be a tailwind for sure I think year over year. The question is as you wrap around on the loading of inventory there may be a temporary.
Speaker Change: Number that we have to worry about probably in mostly in the Q2 frame.
Okay, and David just as you think about paying opex per building.
Speaker Change: I think you've talked about potentially been taking panopticon.
Speaker Change: Net active as well and maybe pricing that down to be a little more competitive with some of the discounting we've seen from other <unk> players I mean, how do you think conceptually about.
Speaker Change: Panoptic has been such a good product on its own how many docs might want to take the discounted version. If you will is 10 optics versus pay the full full rates is paying opex trial with the less gathering there.
Speaker Change: Well I'm going to I'm going to Dodge. Your question, just because I don't want to give our friends from the competition exactly what we're going to do on this one I think in truth you do hit your 100% right. We have some flexibility here, we like both of these products. The other way to play that one would be to make sure pro was premium.
And I think we will see how this plays out in the market, but I think it does give us a lot of flexibility let me leave it at that.
Speaker Change: Fair enough. Thanks.
The last question is from David Harrington from J P. Morgan. Please go ahead.
Speaker Change: Hey, guys. Thanks for question and I'm, sorry, but we're still going to be sent to Paris.
Please just on the $80 million higher just wanted <unk>.
Speaker Change: Geographically, where that was derived from is that U S to China U S into Europe, just need some help.
Speaker Change: Think about where that might go.
Speaker Change: And then just to clarify the 80 million gross headwind is that rates as of now.
Speaker Change: If we return to strong rates following the 90 day suspension.
Speaker Change: The impact be for this year, and then potentially annualized into 2026.
Speaker Change: Yeah, Great question so.
Speaker Change: The $80 million.
Speaker Change: Split between China.
Speaker Change: It's primarily China, and then lets call in exports to China.
Speaker Change: So our levels of imports from China is relatively small so.
Speaker Change: The way I would think about it we picked 10% we held them flat from that was announced through the rest of the year and.
Speaker Change: The reason the reason we did that as I'm just not quite sure what the rate is going to be in August 15th depending on what you read as you indicated some folks think its going to go back to 125. There are other trade Association say that vast majority of the tariffs that were announced after liberate reiteration day had been cancelled. So then therefore it would go back.
Speaker Change: 34%. So we have chose not to not to try to speculate as to whats going to happen and we basically treated it like we treat FX, we've snapped a point in time and that's what we've assumed going forward. So to answer your question directly if it is 125 and it does go back to August 15th.
Speaker Change: They would have it would have a material impact on four months' worth of Cogs in China now keep in mind now a lot of that gets hung up on the balance sheet because it takes time to roll through the P&L.
Speaker Change: But we're also probably have a significant impact in 2026, now which you need to be careful of is if this thing were long term and that was to happen. Then obviously, we would take some different strategic moves from a mitigation perspective again similar to what we talked about earlier, we look heavily at pricing strategy. We look at heavily a tax strategy at manufacturing.
Speaker Change: So I don't really want to speculate on what would happen in 2026, but thats sort of how we don't want to Dodge the question, but thats sort of how we thought about it.
Speaker Change: And then maybe just one follow up.
Speaker Change: Any substantial see any tailwind from some of your competition potentially more exposed to taxes, particularly on the equipment side.
Speaker Change: No look I think I think we're all kind of in the same spot.
Speaker Change: Lot of folks have.
Speaker Change: Have a nice business in China, we have a big business in China and in Japan, both of which are countries that we mostly import from the U S. So that that's something to think about and obviously most of our competition to do the same thing however.
Speaker Change: We look very carefully in market to see what the pricing potential is for us.
Speaker Change: Whether or not we can take advantage of our of our circumstance or or somebody else's and so we'll look market to market in the if we get into this kind of.
Speaker Change: How do we mitigate things a little more carefully but right now our hope in particular is that cool minds will prevail here and we will see kind of a zero for zero view.
Speaker Change: As I said earlier there is not.
Speaker Change: The <unk> folks will tell you there as well the Chinese that there is not a trade imbalance between China and the United States on Med Tech products and so there isn't a real logic for it other than its part and getting caught up in a lot of.
Speaker Change: Negotiation, so our point of view right now on the whole of our businesses, let's ride this out let's let's be smart about it let's be we can make the moves we need to at the right times, but let's hold our investments in R&D, let's hold behind the new product flow and let's let the new products really carry us through the end of the year I think this is where we started the year at.
Speaker Change: Exactly what we're going to end the year, we need to get our growth going again and thats exactly what were having.
Speaker Change: A good time doing right now.
Speaker Change: That's very clear thank you.
Speaker Change: This concludes the question and answer session I would like to turn the floor back over to Dan Cravens for closing comments.
Dan Cravens: All right everybody. Thanks for your time this morning and afternoon. If you have any other follow up questions certainly feel.
Speaker Change: For media reach out to our corporate communications team.
Speaker Change: And investors feel free to reach out to either island, Frank and myself. Thanks again.
Speaker Change: This.
Speaker Change: Todays teleconference. You may disconnect your lines at this time, thank you for your participation.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Okay.